The estimation of implied volatility from the Black-Scholes model: some new formulas and their applications
This paper provides a more accurate formula for estimating the implied volatilities for at-the-money calls than the existing formula as developed previously by Brenner and Subrahmanyam (1988). New formulas are also given for estimating the implied volatilities of in- or out-of-the-money calls. These formulas are derived mathematically and assessed by using numerical tests. All the new formulas are easy to use and accurate for a wide range of option moneyness and time to expiration.
|Date of creation:||20 Feb 2003|
|Date of revision:|
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- Chambers, Donald R & Nawalkha, Sanjay K, 2001. "An Improved Approach to Computing Implied Volatility," The Financial Review, Eastern Finance Association, vol. 36(3), pages 89-99, August.
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